The UK treasury estimates that gross spending on public sector procurement increased by 5% to a total of £407 billion in the period of 2023/2024. The concept of sustainable procurement prioritises the integration of Environmental, Social and Governance (ESG) principles into an organisation’s purchasing strategy and supply chain management practices. Companies in areas like healthcare, automotive, food production, manufacturing and Fast-moving Consumer Goods (FMCG) are under more and more pressure to show how they source responsibly, cut down on emissions, and meet ESG standards. Central to this change is the need to implement sustainable procurement in supply chain operations. This is a process that looks at more than just price and wait time; it also looks at how the supply chain's actions affect people, the environment and the economy.
What is Sustainable Procurement?
The International Standards Organisations (ISO) defines sustainable procurement as “the process of making purchasing decisions that meet an organisation’s needs for goods and services in a way that benefits not only the organisation but society as a whole, while minimising its impact on the environment.” It’s when organisations prioritise the acquisition of goods and services in a way that delivers long-term value economically, socially and environmentally.
Key Dimensions:
- Environmental: Reducing greenhouse gas emissions, energy use, waste and pollution
- Social: Ensuring fair labour practices, diversity, community impact and ethical sourcing
- Economic: Supporting local suppliers, ensuring value for money and fostering long-term partnerships
ISO 20400 Sustainable Procurement Framework Explained
ISO 20400, released in 2017, is the world's first international standard providing guidance on delivering sustainability objectives through supply chains. Unlike many standards, ISO 20400 is not a certification requirement but rather a comprehensive framework that helps organisations integrate sustainability principles into their procurement processes regardless of their size, location or sector.
Principles of ISO 20400
The standard is built upon twelve core principles that guide sustainable procurement implementation:
- Accountability - Taking responsibility for impacts on society, economy and environment throughout supply chains.
- Transparency - Being open about procurement decisions and encouraging suppliers to do likewise.
- Ethical behaviour - Promoting integrity throughout supply chains.
- Full and fair opportunity - Avoiding bias in decision-making, including for small and medium-sized organisations.
- Respect for stakeholder interests - Considering the interests of all parties affected by procurement activities.
- Respect for rule of law and international norms - Actively encouraging suppliers to abide by regulations.
- Respect for human rights - Upholding internationally recognised human rights.
- Innovative solutions - Seeking and encouraging sustainability innovations.
- Focus on needs - Reviewing demand and seeking sustainable alternatives.
- Integration - Embedding sustainability into existing procurement practices.
- Analysis of all costs - Considering lifecycle costs and wider impacts.
- Continual improvement - Working toward ongoing enhancement of sustainability practices.
Building a Sustainable Procurement Policy
Developing an effective sustainable procurement policy requires a structured approach that translates sustainability principles into actionable guidelines for procurement teams. An organisation's sustainable procurement policy serves as the foundation for embedding ESG considerations throughout supply chain operations, establishing clear expectations for both internal stakeholders and suppliers.
1. Set ESG Priorities: The first step to ensuring sustainable procurement is picking key areas and setting measurable ESG targets. This will entail:
- Hotspot identification: Conduct risk-mapping assessments to identify suppliers with the highest ESG impact. Procurement teams can leverage spend-to-emissions mapping to determine spend areas with higher levels of emissions.
- Materiality assessment: Determine which ESG factors represent material risks to your business operations and align with organisational values.
- Measurable targets: Define specific, quantifiable objectives such as reducing supply chain carbon emissions by a set percentage, ensuring suppliers meet ethical sourcing standards or increasing procurement from diverse suppliers.
When establishing ESG goals, it's essential to consider your organisation's specific needs, priorities, values and resources. Understanding your business case helps clarify whether sustainability is a core company value, a market requirement or primarily driven by regulatory compliance.
2. Stakeholder Engagement and Internal Alignment: To ensure successful implementation of sustainable procurement in the supply chain, the stakeholders in the business (customers, investors and suppliers) should be aware and involved in deploying and monitoring the procurement strategy. Categorising suppliers into relevant groups and defining appropriate targets for each category ensures initial efforts focus on areas with maximum impact.
3. Policy Documentation and Communication: The sustainable procurement policy document should be clear, concise and comprehensive. A well-structured policy typically includes:
- Clear objectives: Outline sustainability goals, criteria for supplier selection and expectations.
- Defined processes: Document the procurement process as a simple flow chart detailing required steps from supplier onboarding to quality control.
- Practical guidance: Provide detailed notes on factors to consider during procurement, such as information security matters or environmental considerations.
- ESG criteria: Specify requirements for environmentally friendly materials, energy-efficient products and socially responsible practises.
Once developed, the policy must be effectively communicated to all stakeholders. This involves translating ESG goals into procurement processes and decisions, redesigning purchase-to-pay processes and mapping decision points for sustainable choices. The communication strategies should include training procurement teams on sustainable sourcing, engaging leadership teams to integrate the policy in day-to-day operations and clearly communicating expectations to suppliers. Regular reporting on efforts and progress builds transparency, which is key to demonstrating commitment to sustainability.
The Business Benefits of Sustainable Procurement
Implementing sustainable procurement practices across supply chain operations delivers measurable benefits:
Risk Management
- Reduces exposure to ESG-related supply chain disruptions: By sourcing from environmentally and socially responsible suppliers, businesses can avoid disruptions caused by non-compliance, labour disputes or environmental violations.
- Anticipates compliance with future regulations: Proactive sustainable procurement helps organisations stay ahead of tightening environmental and social legislation, reducing the risk of penalties or last-minute overhauls.
- Minimises reputational risk linked to poor supplier practices: A robust supplier vetting process ensures alignment with ethical standards, protecting the brand from association with exploitative or environmentally damaging practices.
Cost Efficiency
- Enables long-term savings through energy efficiency and waste reduction: Sustainable procurement prioritises products and services with lower lifecycle costs, reducing energy consumption, maintenance needs and waste disposal expenses over time.
- Supports innovation through circular economy partnerships: Collaborating with suppliers who embrace reuse, remanufacturing and resource efficiency fosters innovation and opens new cost-saving opportunities.
Stronger Tender Performance
- Increases chances of success in PPN 06/21-aligned tenders: Demonstrating sustainability leadership through well-documented procurement practices and credible carbon reduction plans strengthens bid submissions and meets mandatory government criteria.
- Demonstrates alignment with public sector social value models: Clear articulation of environmental and community benefits can help businesses score higher under social value evaluation frameworks used in public sector procurement.
Enhanced Brand Value
- Builds trust with customers, partners and investors: Transparency in ethical and sustainable procurement signals responsible leadership, helping companies attract investment and foster long-term loyalty.
Download the Guide to Sustainable Procurement
To help procurement leaders and sustainability professionals address these demands, we have published a new resource: A Guide to Sustainable Procurement. Built around the six core pillars of sustainable procurement, it provides clear, actionable guidance aligned with ISO 20400, helping organisations gain a competitive edge especially when bidding for government contracts.
This guide will teach you:
- Why Businesses Need to Implement Sustainable Procurement
- Introduction to PPN 06/21
- The 6 Core Pillars of Sustainable Procurement
- A Real-life Example
The Bottom Line
The UK Government’s legally binding Net Zero target for 2050 has transformed the role of procurement in both the public and private sectors. Through policies such as Procurement Policy Note (PPN) 06/21, sustainability credentials have become a pass/fail criteria for suppliers bidding on central government contracts. This policy has reshaped public procurement but has also influenced private sector buyers who are adopting PPN-aligned standards. Explore how Tunley Environmental can help embed sustainability into your procurement strategy: Sustainable Procurement ISO 20400 | Tunley Environmental